The US dollar has been the dominant currency in international trade and financial markets. But in recent years, there seems to be growing talk of de-dollarisation and becoming less reliant on the US dollar.
Whether it’s Russia and China settling trades in yuan or BRICS countries talking about creating their own reserve currency, the topic of de-dollarisation seems to be gaining traction.
But what does it actually mean for investors in Singapore and, should we be worried about the US dollar and its place as the world’s reserve currency?
What Is De-dollarisation?
De-dollarisation refers to the process of reducing reliance on the US dollar in global trade, finance, and central bank reserves. For decades, the US dollar has played a central role in the global economy.
It’s the most widely used currency for trade settlements, international debt issuance, and central bank reserves.
In fact, around 60% of the world’s foreign exchange (FX) reserves are still held in US dollars. Most commodities, from oil to gold, are priced in US dollars.
And when markets are uncertain, investors typically flee to US treasury bonds, given its perceived safety but also immensely liquid market. But in recent years, that dominance has started to face pushback.
Acceleration Of De-dollarisation
After the Russia-Ukraine war began, the US froze Russia’s access to its USD reserves, in effect “weaponising” the dollar.
This sent a message to some other countries, that their US dollar assets might not be as safe as they once thought.
Added to this are the ongoing US debt and inflation concerns. The US has run persistent deficits and now carries over US$36 trillion in debt.
China is also actively pushing for more trade in yuan, especially with energy exporters like Saudi Arabia. Initiatives like the Belt and Road have further encouraged the use of non-dollar currencies in bilateral deals.
Is the Dollar Really Losing Its Status?
As of now, the US dollar accounts for over 88% of global forex transactions. The currency also accounts for around 60% of global reserves (down slightly from 65% a decade ago) and half of all global trade invoicing, according to news reports.
The Chinese yuan, while growing in usage, is only used in about 2% of international payments, according to the International Monetary Fund (IMF) and is tightly controlled by the People’s Bank of China.
While the dollar’s hegemony isn’t under immediate threat, the foundations of its dominance are being gradually eroded.
What Could De-dollarisation Mean For Singapore?
As a small, open economy that imports nearly everything from food to fuel, any shift in the global currency order will affect Singapore.
If the US dollar weakens over the long term, the Singapore dollar could strengthen relatively, as we’ve witnessed in 2025.
While further strengthening of the Singapore dollar versus the US dollar isn’t guaranteed, the weakness has made investors here look at their share of US dollar assets more closely.
Many of our ETFs and private portfolios are invested in USD-denominated assets. That’s natural and not unique to Singapore. If the US dollar depreciates, it could eat into returns when converted back to Singapore dollars.
How Singapore Investors Can Position For A Weaker Dollar
One of the simplest things you can do is review and perhaps reduce your overexposure to USD-denominated assets. That doesn’t mean selling your US stocks or ETFs immediately but it does mean being aware of how much of your portfolio is linked to the dollar.
Many market experts suggest considering adding exposure to regions or countries that don’t price their assets in US dollars, such as ETFs listed in Europe or local Singapore stocks or ETFs priced in SGD.
Another way to diversify is to try to own “real assets”, which many market watchers believe will benefit in this scenario. If de-dollarisation leads to long-term inflation in USD-linked assets, certain commodities may do well. We’ve already seen that with gold, which you can buy an ETF of on the SGX.
However, other real assets include exposure to real estate, so real estate investment trusts (REITs) fit the bill perfectly – especially given the number of them listed on the SGX.
The US still has the deepest capital markets, a trusted legal system, and unmatched liquidity. No other country has the scale, trust, or infrastructure to replace the dollar anytime soon.
For Singapore investors, the key takeaway isn’t to dump your US holdings or panic about a new world order. It’s to stay diversified, be mindful of currency risks, and position yourself to benefit from global shifts.
At the end of the day, smart investing is less about reacting to headlines and more about building a portfolio that’s well-balanced and resilient across various scenarios.
If de-dollarisation continues, those who quietly prepare their portfolios today will be in a stronger position tomorrow.
